Water Industry Commission for Scotland - independent review: sponsorship oversight and governance

2. Management Action Plan

2.1. Recommendation One – Roles and Responsibilities – Medium Priority

2.1.1. Issue: the WICS Framework Document is out of date and needs refreshed. The Framework Document is one of the key governance documents which sets out roles, responsibilities and delegations. The Portfolio Accountable Officer (DG NZ) is responsible for ensuring an up to date document is in place. The Accountability section of the SPFM sets out the roles and responsibilities regarding developing and agreeing the Framework Document.

2.1.2. Recommendation: The WICS Framework Document should be reviewed in line with the PBSU model framework checklist and SPFM model framework document. The Sponsor Director should review ST roles and responsibilities to ensure they align to the PBSU guidance and strategic sponsorship products, are proportionate, and are communicated to ST and WICS stakeholders.

2.1.3. Management Response: The Sponsor Director and ST recognise that a robust and up-to-date Framework Document is of vital importance to ensuring WICS is well governed and discharges its functions effectively and in line with the expectations of Ministers. Whilst much of the substance of the current WICS Framework Document will hold, there are elements of the document which require updating in line with the new model framework. ST roles and responsibilities are being reviewed to ensure they align to the PBSU guidance and strategic sponsorship products – and the requirements to deliver these roles effectively will be taken into account in the review of resourcing. Any subsequent changes to roles and responsibilities will be communicated to stakeholders accordingly.

2.1.4. Management Action: Undertake a full refresh of the Framework Document – working with WICS. Review the ST roles and responsibilities and agree any changes to these with DG NZ. Communicate changes internally and to WICS.

2.1.5. Action Owner: Director of Energy and Climate Change and Deputy Director, Water Policy and DECC Operations, sign off by DG NZ as Portfolio Accountable Officer.

2.1.6. Action Date: Full review and proposed changes by 30 September 2024. SG and WICS final sign off by 31 October 2024.

2.2. Recommendation Two – Sponsorship Capability and Capacity – High Priority

2.2.1. Issues: The SPFM and WICS Framework Document set out formal roles and responsibilities of the ST. However, sponsorship roles and responsibilities in practice are unclear. Previously, sponsorship responsibility and engagement was concentrated in one individual. Due to staffing changes in the team, there is a need to refresh and reset roles and responsibilities across the ST to ensure these are clear and understood. Following recent retiral, movers and leavers there is a new ST in place. There has been inadequate induction and handover arrangements as staff move on and resource gaps in key roles.

2.2.2. The SPFM and Framework Document set out responsibilities for monitoring compliance with the Framework Document and wider monitoring of WICS activities. In the period under review, key documents were not being systematically scrutinised as part of ST engagement with WICS, including: Audit and Risk Committee papers; Board papers; risk registers; and SG Certificate of Assurance checklists, specific to sponsored bodies. Capacity, training and support requirements, including through induction, should be reviewed to ensure the ST are supported to discharge their duties.

2.2.3. Recommendation: A review of resource requirements for the ST should be undertaken – ensuring appropriate and proportionate resource (both capacity and capability) is in place to ensure the team can discharge sponsor requirements effectively, alongside wider business as usual responsibilities. Refreshed ST roles and responsibilities should be built into staff objectives. The Senior Responsible Officer (SRO) should ensure that SG ST succession planning arrangements are in place to ensure consistency of support for sponsored bodies.

2.2.4. The ST should engage with PBSU to ensure that all members of the ST have undertaken training and have appropriate support to discharge their roles and responsibilities effectively.

2.2.5. The ST should highlight to the Sponsor Director any key sponsorship functions which cannot be discharged due to capacity or capability gaps in order that the potential risks arising from this can be fully considered.

2.2.6. Management Response: A review of resource requirements is underway to ensure appropriate capability and capacity is in place. This will be kept under ongoing review and any gaps will be escalated for action in a timely manner. Appropriate training will be provided, and induction processes updated to be clear on the requirements of the sponsorship role. In addition to having added temporary Deputy Directors and recruiting a new permanent Deputy Director, a new senior team leader for the ST is now in place until the year end. This will give us the time to comprehensively review resource requirements.

2.2.7. Management Action: Identify and deliver training for the existing ST staff; review resource requirements within the ST; and provide a summary of any resourcing gaps and associated delivery risks to the Sponsor Director and DG NZ.

2.2.8. Action Owner: Deputy Director, Water Policy and DECC Operations.

2.2.9. Action Date: Review Resourcing – 30 September 2024. Deliver Training – 31 October 2024.

2.3. Recommendation Three – Sharing/Escalation Arrangements – High Priority

2.3.1. Issue: The ST completed the RAG assessment of WICS throughout 2023-24. The most recent RAG rating was reported to the DG NZ assurance meeting in May 2024.There were some gaps in elements of the underpinning assessment, including partial responses which would have benefited from further interrogation. The nature of scrutiny and review of the underpinning assessment was not documented. If this tool is used effectively it would support early identification of risk and issues.

2.3.2. There are a wider package of tools to support the ST in discharging their roles. The uptake of these tools has not been progressed. Instead, in the period under review, the ST has focused on the immediate response to the s22, including supporting WICS with its governance arrangements.

2.3.3. Recommendation: Roles and responsibilities relating to the completion of the WICS RAG status and underpinning assessment require clarification, in line with the Public Body RAG Rating Guidance. Once agreed, these should be documented and communicated across DG NZ, including to SLOs.

2.3.4. Deadlines for completion and review of the RAG status should be timetabled and documented to allow SG ST, Director and Portfolio Accountable Officer sufficient time to consider the associated risks, underpinning assessment and discuss with the applicable ST, prior to quarterly discussions at DG NZ assurance meetings. Evidence of appropriate sign-off should be retained.

2.3.5. To aid engagement with the sponsored body, actions arising from DG level sponsorship arrangements discussion and scrutiny should be centrally monitored, reviewed and communicated to the ST.

2.3.6. The ST and WICS should agree escalation routes, both formal and informal, should significant issues and/or risks be identified through the RAG process.

2.3.7. The ST should document the roadmap to implementing the wider set of strategic sponsorship products. The ST should follow the PBSU guidance, and complete the strategic sponsorship products in order to focus discussions with WICS and ensure that key governance papers are subject to review and challenge, where applicable.

2.3.8. Management Response: We are engaging with PBSU to support upskilling, for example, in the area of risk management training and RAG rating, of the ST. This will ensure the ST is clear on their roles and responsibilities and then help ensure that the assessment is a meaningful tool that supports the Sponsor Director and DG NZ in their management of risk and provides them with the required assurance.

2.3.9. We will use the refresh of the WICS Framework Document as an opportunity to clarify and, where required, agree and strengthen risk escalation routes for WICS and the ST. Beyond formal escalation routes such as reviewing key governance papers, the ST will engage with WICS to foster a more open culture of information sharing through the regular monthly sponsorship meetings that have been reinstated since publication of the s22.

2.3.10. Management Action: Deputy Director, Water Policy and DECC Operations: Working with PBSU, agree, document and communicate the RAG status assessment roles and responsibilities in relation to WICS.

SLO and ST: Create a plan and timeline to complete strategic sponsorship products.

2.3.11. Action Date: Both 30 September 2024.

2.4. Recommendation Four – Public Body Engagement – Medium Priority

2.4.1. Issue: It is positive that regular engagement meetings have been taking place since the s22 (see section 3.2.1). There are opportunities to further enhance this engagement. For example, the assessment areas in the RAG tool provide useful prompts to support the early identification of risks, issues and opportunities to strengthen governance and sponsorship oversight. This approach would support the ST in its ‘steady state’ sponsor responsibilities, beyond the immediate response to the s22. Further, the status, outcome and actions emerging from reviews of 2023-24 financial transactions have not been subject to periodic review as part of the SG ST engagement with WICS. The associated action plan has been subject to periodic review in sponsorship meetings and progress in delivering required changes is being monitored through DG/Director level meetings and sponsorship meetings. The ST should continue to be sighted on this work and the next steps emerging from it, in order to ensure they discharge their role effectively and support the Portfolio Accountable Officer to discharge their role. The RAG tool and underpinning assessment is not currently discussed with WICS in advance of the RAG rating being completed.

2.4.2. Recommendation: The monthly sponsorship and/or leadership meetings should include a recurring agenda item to discuss the status, outcome and resultant actions following the 2023-24 financial transaction reviews, as well as the s22. This would help to better inform the RAG status completion, as well as flag any specific areas for ST support and/or guidance. As per the timetable referenced at recommendation three, the ST should ensure that the sponsorship meetings prior to the submission of the RAG status assessment cover each of the 22 questions to allow the ST to better support WICS as well as enable timeous identification and, where required, escalation of issues and/or risks.

2.4.3. Management Response: Since publication of the s22 report, regular sponsorship meetings have been held with WICS. These meetings are now held monthly and include a recurring agenda item that covers the various WICS reviews and progress on resultant actions.

2.4.4. Monthly meetings between the Director Energy and Climate Change, DG Net Zero and the WICS Chair and Interim CEO provide senior scrutiny while the s22 action plan and various reviews are concluded. These meetings similarly include discussion of WICS action plan progress. We will ensure that the RAG status assessment is discussed in advance with WICS.

2.4.5. Management Action: Include the questions that underpin the RAG status assessment in WICS sponsorship meetings on a quarterly basis, aligned to DG Net Zero assurance review periods.

2.4.6. Action Owners: SLO and ST.

2.4.7. Action Date: From September sponsorship meeting onwards.